Yahoo Finance A big engineering firm 'Brexit-proofed' itself by reducing UK jobs and expanding in Prague
On paper, Ricardo (RCDO.L) should be freaking out about Brexit. After all, it is an engineering and environmental group that employs over 2,900 engineers, scientists, and consultants across the world and thrives in cross border trade since it’s London-listed.
However, the group’s CEO David Shemmans told Yahoo Finance UK that since the company’s customer base is “well-split” and it has taken a number of steps in advance to make sure it mitigates as much fallout from Britain leaving the European Union next March, company-wise it’s pretty “Brexit-proof”.
“From a company perspective, we’ve had quite a few initiatives to safeguard ourselves in every eventuality,” said Shemmans. “That includes securing bids from the European Commission and deliberately servicing those from our European offices and increasing headcount in Prague (Czech Republic) and reducing headcount in the UK.
“Even our manufacturing engine contracts allows for price fluctuations in component costs, which makes us quite Brexit-proof when it comes to the uncertainty of the economy,” he added.
The move falls in line with many UK firms’ contingency plans in the event of a Brexit deal that vastly differs from the conditions Britain enjoys as an EU member at the moment.
Barclays (BARC.L) is relocating a chunk of jobs to Frankfurt, while 20 banks have committed to the German city since the vote, said German officials. Japan’s biggest bank, Mitsubishi UFJ, is relocating its UK investment-banking operations from London to Amsterdam, even though it maintains that Britain’s capital city will still be it’s EMEA HQ. Both Nomura (NMR) and Daiwa have chosen Frankfurt, Germany as its new EU base.
The group’s customer base is pretty diversified, with 27% coming from Asia, Europe (27%), UK (34%), and the US (12%). According to its latest set of preliminary full-year results, it has been business as usual for the group amid Brexit uncertainty. It clocked a record order intake at £413m ($542m) while revenue jumped by 8% and profit before tax increased by 2%.
It counts the UK government as customers as well as major firms across rail, defence, motorsport, energy and environment. Another key customer base includes passenger cars, commercial vehicles, and motorsport.
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Even though automakers have been in spotlight over impact Brexit has been having on the industry, Ricardo’s Shemmans highlighted that it’s not as simple as just counting Brexit as a problem.
“What we’ve seen this year, and whether you can attribute it to Brexit, is a drop off in orders of autos,” said Shemmans. “You can see what’s been happening with Ford and Jaguar Land Rover both suffering depleted sales. But we also think this is a reaction by consumer of just not buying cars, resulting from a combination of Brexit and the anti-diesel campaign.”
Latest figures for the UK show that diesel car sales tumbled 30% in the first six months of the year. This week Britain’s largest automaker Jaguar Land Rover announced that 1,000 workers at its Castle Bromwich factory near Birmingham would be downgraded to working three days per week.
As Yahoo Finance UK highlighted, analysts explained that the key reason behind this decision is consumers’ growing preference for SUVs and crossover vehicles.
READ MORE: Brexit isn’t the only reason for Jaguar Land Rover’s production cuts
